SC refuses to stay MDR on UPI payment

NEW DELHI, Sept 28: The Supreme Court on Monday refused to grant an interim stay on the imposition of Merchant Discount Rate (MDR) on specified UPI person-to-merchant transactions above Rs 2,000 coming into effect from October 15.

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The top court agreed to examine the challenge to the imposition of MDR and asked the Centre, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) to respond within four weeks on the plea.

The apex court was hearing a public interest litigation (PIL) filed by advocate Anjan Datta challenging the Centre's decision to impose MDR on specified Unified Payments Interface (UPI) person-to-merchant transactions above Rs 2,000. The plea has challenged the Centre's September 14 notification and the MDR framework announced on September 15.

Ending nearly six years of fully free UPI payments, the government has introduced a 0.4 per cent fee on transfers worth over Rs 2,000 made to merchants through the UPI platform from October 15 while explicitly ring-fencing everyday person-to-person transactions and small payments from any charge.

A bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V Mohana issued notice to the Centre, the RBI and the NPCI seeking their responses on the plea.

Additional Solicitor General N Venkataraman, appearing for the Centre, told the bench that 96 per cent of people using the gateway were exempt.

"The Government of India is not taking even a single rupee out of it," the law officer said.

The bench asked the Centre to file its counter affidavit explaining the basis for the move to impose a fee on transfers worth over Rs 2,000 made to merchants through the UPI platform.

Venkataraman said the charges for essential services are capped at Rs 5.

"It is neither a tax nor a fee," he said.

"We need all these facts in a short affidavit. It will help us understand better. It is less a legal issue and more a technical issue," the bench observed.

During the hearing, the top court said it would like to see the legal source of implementing the charge.

"Is it a tax or a fee? If not a fee, then what is the executive basis for making this expropriation?" the bench said.

The law officer said it was not an expropriation.

He said it was a settlement fee between the payment aggregators and the banks.

"The government is several steps away from this money," he said.

After the bench issued notice on the plea, the counsel appearing for the petitioner said, "Please stay it till then".

The bench refused to grant any interim stay on the Centre's decision to impose MDR.

The MDR will be capped at Rs 300 for payments of Rs 75,000 and above. (PTI)